Market size, trade, competition and productivity: evidence from OECD manufacturing industries
AbstractThis article investigates empirically the links between market size, trade, competition and productivity, using a cross-section of 11 OECD countries and 11 manufacturing industries over the period 1995 to 2000. To deal with endogeneity concerns we extend the Frankel and Romer (1999) approach to construct instruments for both trade and competition. We find that larger, more integrated markets exhibit more competition (lower markups) and higher productivity, in line with the theoretical model by Melitz and Ottaviano (2005). The pro-competitive effect of trade accounts for approximately 30% of trade's total productivity effects.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 39 (2007)
Issue (Month): 17 ()
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- Fleming, David A. & Abler, David G., 2013. "Does agricultural trade affect productivity? Evidence from Chilean farms," Food Policy, Elsevier, vol. 41(C), pages 11-17.
- Stanislav Cernosa, 2011. "Openness to Trade, Migration and Foreign Direct Investments of the EU," WIFO Working Papers 401, WIFO.
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